Stock Market Crash More to Come

Dow Plunges Most Since 1987 Before Paring Losses - The Dow Jones Industrial Average posted its biggest intraday loss since the market crash of 1987, the
euro slid to a 14-month low and yields on Greek, Spanish and Italian bonds surged on concern European
leaders aren’t doing enough to stem the region’s debt crisis. U.S. Treasuries surged.

The New York Stock Exchange told CNBC that there were no system errors during the Dow’s plunge as
speculation of bad trades swirled through the market. The Nasdaq OMX Group Inc. said it is working
with other markets to review the plunge.

The cost of protecting European bank bonds from default surged to the highest level in 13
months as Moody’s Investors Service said lenders face “very real, common threats” from the
region’s fiscal crisis.

Banking systems in Greece, Portugal, Italy, Spain, Ireland and the U.K. may come under
pressure as the crisis worsens, Moody’s said in a report today. The ratings firm said yesterday it
may downgrade the Portuguese government and its banks after Standard & Poor’s last week cut
the sovereign debt of Greece, Portugal and Spain.

(Financial Times) Analysts said the euro’s breach of $1.30 against the dollar could have an
impact on the behaviour of the world’s central bank reserve managers, which could drive the
single currency lower still as they pondered its status as a reserve currency.

Diversification of global reserve holdings has been a source of support for the euro in recent
years as central banks sought to adjust their portfolios away from the US dollar.

VIX challenges its broadening formation.

-- The VIX challenged the top
trendline of its Broadening
Formation, closing above short-term
Trend Support at 22.15. Yesterday I
suggested that the VIX may break
above 29.22 in the near future. It
closed in the upper half of its weekly
trading band and has a potential
target of 60.

The CBOE Put-Call Ratio for
equities ($CPCE) came down a
little at .97 today. Retail investors
are now net neutral today. The
pros have cut back on the $CPCI
to 1.23 (less bearish) at the end of
the day. The 10-day average is still
high at 1.47. The NYSE Hi-Lo
index closed down 129 points today
to -125, the lowest level since last
March.

The Broadening Top leaves little
doubt that the next extension could
leave SPY testing 65 by early June.

There are other variations, but for the
present, I suggest that an attempt to
buy the market may be made
tomorrow. If it fails, the circuit
breakers may be invoked either
Friday or Monday.

The QQQQ tests lower suport at 41.

Action: Sell/Short/Inverse
-- QQQQ tested the bottom trendline
of its Broadening Formation and took
out the February low. The bounce
back to 47 was to be expected. It
closed at weekly Trend
Support/Resistance at 46.60.
The next move should take out the
bottom trendline of the Broadening
Formation. There may not be a retest
of the lower trendline once it is
crossed. The NASDAQ is
investigating the possibility of some
erroneous trades made this afternoon.

ZeroHedge is shut down, so there
will be no rebuttal. I suggest that this
was simply a panic selloff.

XLF continues its decline.

Action: Sell/Short/Inverse
--XLF has much further to go to test
the bottom of its Broadening
Formation. Yesterday I suggested
that XLF may decline in a series of
1s and 2s leading to an extended
breakdown. It appears that this
observation was correct.
The bottom of the formation for XLF
may happen sooner than early June.
Citigroup pleads innocence of
erroneous trades today.

FXI took out its February low.

Action: Sell/Short/Inverse
-- FXI is in a confirmed bearish
trend. The cross of the short-term Trend
Resistance below the intermediateterm
Trend Resistance confirms the
decline as well as the violation of the
last Seasonal Cycle low in February
makes this decline doubly bearish.
The Shanghai market declined 4.11%
in overnight trading, confirming the
downtrend.

GLD soars in a panic throw-over.

Action: Neutral
-- GLD came within a point of
exceeding its December high. As it
stands, the corrective pattern barely
qualifies as labeled. A further push
above 118.76 invalidates the wave c
and above 119.54 creates a new high.
Nonetheless, I am more bearish than
bullish on GLD. GLD has a giant
wedge formation in the weekly as
well as the daily charts, so once it
turns, it may collapse. I am simply
waiting for it to decline below shortterm
Trend Support/Resistance to
make a position in it.

USO’s decline continues.

Action: Sell/Short/Inverse
-- USO made big headway toward its
lower trendline. Given the close
proximity of that trendline, I suggest
that USO may fall much deeper.
Once below 34-35, there is virtually
no support for USO until it reaches
single digits. I am not sure what kind
of calamity may befall us, but it
appears that there may not be very
many using oil later this year.

TLT made a huge spike today.

Action: Neutral
--TLT spiked even higher as panic
buying hit treasuries. It remained
above short- term Trend Support at
91.51.

The cycle pattern is calling for a
decline into a trading cycle low in
mid-May. It has exceeded the top of
its daily cyclical range. The weekly
range allows for TLT to go as high as
105, but it may have already seen the
top. We could see an inversion of
the cycle, where the called-for low is
actually a high, but I am not taking
any chances of an abrupt and strong
reversal at this point.

UUP continues upward.

Action: Buy/Long
-- UUP remains above short -term

Trend Support at 24.12. There is a
pivot on Friday-Monday that we may
want to monitor, but frankly I see no
end to the pattern, yet.

The cycles call for a potential low in
mid-May but that still leaves UUP an
opportunity for another week or so of
gains, if UUP continues rallying
through its pivot. The pattern and
the breakout still support UUP going
higher in the short term.

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